By Khabar Rojana 
A new version of the Income Tax Bill will be introduced in the Lok Sabha on August 11. The Select Committee had suggested a host of changes in the Income Tax Bill, which was introduced in the Lok Sabha on February 13. Let’s know here why the bill has been withdrawn.
Union Finance Minister Nirmala Sitharaman on Friday withdrew the Income Tax Bill, 2025, in the Lok Sabha. The government now plans to bring an updated version of the bill, taking into account the suggestions made by the Select Committee. The revised Income Tax Bill is likely to include most of the committee’s recommendations and is set to be introduced in the Lok Sabha on August 11. The bill, initially introduced as a long-overdue overhaul of India’s decades-old tax legislation, was aimed at modernising and simplifying the country’s direct tax regime. However, after receiving detailed feedback and scrutiny, the government has decided to revisit and revise the draft before bringing it back to the House.
The Income Tax Bill, 2025, was envisioned as a comprehensive replacement of the existing Income Tax Act, 1961, which has governed India’s direct taxation system for over six decades. The idea of rewriting the tax law was first mooted in earlier budgets by the Narendra Modi-led government, with the objective of aligning tax structures with global best practices, enhancing ease of compliance, reducing litigation and making the tax code more transparent and contemporary.
In the Income Tax Bill, the Select Committee had suggested two important changes for citizens earning income from their house properties. First, the 30% standard deduction, which is already allowed after municipal tax deductions, should be clearly mentioned in the revised Income Tax Bill law. Moreover, the benefit of home loan interest deductions, which are now available only for self-occupied properties, should also be extended to rented properties.
The bill sought to simplify provisions, rationalise exemptions, and rework definitions, all while addressing loopholes that have often led to tax evasion or prolonged legal disputes. It also aimed to cater to the modern digital economy, including better frameworks for taxing virtual digital assets, cryptocurrencies and income arising from cross-border digital transactions.
Why was the New Income Tax Bill Withdrawn?
As per the government, the withdrawal was not an abandonment of tax reform but rather a strategic step to improve the bill’s content and acceptability. The draft Income Tax Bill, 2025, had been referred to a Parliamentary Select Committee, which was tasked with examining the proposed law in detail. The committee, after thorough deliberations with experts, stakeholders, and policymakers, provided a set of recommendations suggesting changes in several key areas of the bill.
Union Finance Minister Nirmala Sitharaman indicated that many of these recommendations were constructive and necessary. In order to reflect those changes meaningfully, the government decided to withdraw the existing version of the bill and introduce a revised, updated version.